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Can More Accessory Dwelling Units Fix LA's Housing Shortage?
Amrita Khalid
Amrita Khalid is a tech journalist based in Los Angeles, and has written for Quartz, The Daily Dot, Engadget, Inc. Magazine and number of other publications. She got her start in Washington, D.C., covering Congress for CQ-Roll Call. You can send tips or pitches to amrita@dot.la or reach out to her on Twitter at @askhalid.
Can more accessory dwelling units help a city with a chronic housing shortage?
A wave of new ADU startups that are based in L.A. or serving the region are betting on it. ADU companies like Otto (formerly known as Homestead), which focus on converting pre-existing structures (such as a garage) into housing, serve as a one-stop shop that will help homeowners with financing, design, permitting and labor. Other companies like Azure Printed Homes, Cover, United Dwelling and Villa Homes offer factory-built ADUs that are constructed off-site — also known as “prefab” ADUs. Others still, such as Cottage (based in San Francisco) partner with local contractors and help homeowners design, build and attain permits for their own custom ADUs.
ADUs (also known as granny flats, in-law apartments or backyard homes) describe a category of small, in most cases self-contained homes that can be built beside the original property. A prospect that’s currently trending in Los Angeles, where a chronic housing shortage and sky-high rents coupled with a 2017 state law forcing cities to relax their ADU regulations.
But as novice ADU builders soon discovered, constructing a small house isn’t a small task.
“I wouldn’t say [..building an ADU] is exactly easy, almost anywhere,” said Celeste Goyer, the policy director of Casita Coalition, an L.A.-based organization focused on expanding the use of ADUs for affordable housing throughout the state. “You can’t just go home and pick up a hammer, and have your cousin help you build your ADU. And so expectation management for everyone involved is important.”
The process of getting approved for an ADU normally takes months.
“Generally, many people struggle with the length and complexity of the permitting process and feel like their jurisdictions impose unnecessary red tape in the permitting process,” said Alex Czarnecki, founder and CEO of the custom ADU firm Cottage.
But a number of additional laws may make ADU construction easier in California. Last year Governor Gavin Newsom signed SB 9 into law, which allows California homeowners to build a second house on a single-family zoned lot. Another law known as AB 221 requires local authorities to act on ADU permit applications within 60 days otherwise it’s automatically approved.
“It’s common for certain municipalities to take longer than that to respond to an application or provide incomplete sets of comments,” said Czarnecki. “This drags out timelines for permitting and ultimately impacts the pace at which we can add housing.”
Despite the new laws, few homeowners, Czarnecki said, should attempt to build an ADU by themselves.
“The fact remains that the average homeowner is not a land developer and is not trained or prepared to oversee and manage the design and construction of a new unit on their lot,” added Czarnecki.
To that end, the heads of some ADU companies still believe more has to be done to improve financing the expensive building projects — as well as making them more affordable to low-income and moderate-income individuals. A typical prefab ADU ranges anywhere from $140,000 to $300,000. Custom ADUs are even more expensive. Converting a garage is cheaper, but in L.A., the process can easily approach six figures. None of which factors in the extra costs of permits, which ADU firm Modal estimates costs anywhere between $4,000 to $8,000 in Los Angeles.
There are few mainstream financing options for ADUs available, and renovation loans or cash-out refinancing often don’t cover the entire cost of the project. In a 2021 survey of homeowners by UC Berkeley, nearly 62% said they relied on cash savings or money from a friend or relative to pay for their ADU.
ADU advocates often tout it as an “affordable housing” solution — assuming that property owners will rent them out as an extra source of income. But with the median price of a single-family dwelling in L.A. County almost nearing $1 million, building an ADU is likely an opportunity reserved for more high-income individuals.
“Financing is really the only thing I think of that the city of L.A. and everywhere else really needs to work on. I think L.A. has been doing great with ADU use, and hopefully it will get better,” said Ross Maguire, CEO of Azure Printed Homes.
Samuel Schnieder, the CEO of Otto, said that ADU financing is a major barrier to expansion. Adding that, “It’s often a Catch-22 that the people who are the best equipped or the most enthusiastic about getting an ADU are the ones who can’t necessarily afford it.”
The California Housing Finance Agency this year began offering up to $40,000 in grants for such individuals, but it only covers new ADU “pre-construction” costs, which include everything from impact fees to permits to site prep. In Los Angeles, homeowners with an income below $180,000 qualify for such grants.
A total of 840 people in California have received grants since September — with all but a fraction receiving the full amount, a CHFA spokesperson confirmed to dot.LA.
First launched in 2019, Azure Printed Homes, based out of Culver City, relies on robotic printers to speed up the construction process. The company said it can 3D-print the walls of a 120-square foot unit in less than a day.
Maguire told dot.LA that Azure — which opened up reservations earlier this year — has received pre-orders for 167 units from 119 customers, totaling over $19 million in pre-orders.
But it’s unlikely you’ll see most of these units advertised as new rentals on Craigslist. Maguire says that most of Azure’s customer base desire an ADU to have more space for themselves or to house relatives, rather than to rent out as an additional source of income.
As such, some homeowners opt for factory-built ADUs instead of a more customized option, opting to shorten the timeline for inspections.
“Because our units are pre-approved with the State of California, there’s not a building and safety check that needs to happen on a local level with the city or county of L.A.,” Maguire told dot.LA..
However, even pre-fab ADUs have to be inspected on-site by the local planning authority. “(...the L.A.) Planning Department needs to look at how those modules interact with a specific site themselves, a process that can't be pre-approved as they are site specific,” confirmed a spokesperson for Azure.
In an effort to make the ADU permitting process faster, last year, the city of Los Angeles launched a set of “Standard Plans” that were pre-approved by LADBS. But such plans aren’t cheap — and won’t exempt homeowners from inspections.
“It should be noted that regardless of what pre-approved plan you choose, pre-approved plans still must go through the normal site-specific checks in order for the project to receive a permit,” said Czarnecki.
And if homeowners have the misfortune of building a Standard Plan ADU on an oddly-shaped lot or somewhere with atypical characteristics, they may have to go back to square one. In other words, their ADU will no longer be considered “pre-approved” and will have to go through the longer permitting process.
“Although the Standard Plans are a good jumping off point for creating a product that anyone can use -- at the end of the day, they’re mostly more expensive plans from what I’ve seen,” said Otto’s Schneider.
Casita Coalition and groups like California YIMBY are calling for better financing options for ADUs, particularly those that benefit individual cash-poor homeowners. At present, new ADUs are predominantly built in wealthier, whiter areas. In order for ADUs to actually help bridge the racial-wealth gap, policy experts say they have to actually be a viable option for the less affluent.
“I would be very pleased if more financing options [..for ADUs] developed from credit unions and community financial institutions to provide ADU-tailored loans to help lower income and moderate income home owners build ADUs,” Goyer told dot.LA.
Until then, the dream of Angelenos generating income from their backyards may remain just that.
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Amrita Khalid
Amrita Khalid is a tech journalist based in Los Angeles, and has written for Quartz, The Daily Dot, Engadget, Inc. Magazine and number of other publications. She got her start in Washington, D.C., covering Congress for CQ-Roll Call. You can send tips or pitches to amrita@dot.la or reach out to her on Twitter at @askhalid.
https://twitter.com/askhalid
Luxurious Second Home Ownership without the Headache: How Pacaso is Changing the Landscape of Real Estate
12:36 PM | September 27, 2024
🔦 Spotlight
Pacaso addresses the pain points of second home ownership, offering a luxurious, flexible, and financially sound alternative to traditional second homes and ultra-luxury hotels. Co-founded in 2020 by entrepreneur Austin Allison and former Zillow executive and prominent LA tech figure Spencer Rascoff, Pacaso, an unicorn startup, has redefined vacation home ownership with its unique co-ownership model. Rascoff's contributions to the LA tech scene extend beyond real estate; he also founded 75 & Sunny, an LA-based startup studio and venture fund, and co-founded dot.LA, an LA tech news and events company.
LA residents adore Pacaso for its lush vacation destinations that also make for smart investments. Pacaso offers everything from serene weekend getaways in Aspen to sophisticated escapes in Paris. Each residence, valued between $200k to over $2M for 1/8th, boasts meticulous design, high-end furnishings, and premium amenities. Unlike traditional second home ownership, which involves high costs, maintenance, and underutilization, or ultra-luxury hotels, which lack the personal touch and investment potential, Pacaso's co-ownership model offers a superior solution. Co-owners enjoy the benefits of a high-end vacation home without the full financial burden and hassle of sole ownership, making it a smarter and more flexible choice for discerning buyers.
Image Source: Pacaso
Cabo, Mexico
$822,000 (1/8th ownership)
5 bds. l 5 ba. l 4,969 sq ft
Image Source: Pacaso
Paris, France
$600,000 (1/8th ownership)
2 bds. l 2.5 ba. l 1,410 sq ft
Image Source: Pacaso
Malibu, California
$750,000 (1/8th ownership)
3 bds. l 3 ba. l 1,880 sq ft
Image Source: Pacaso
Park City, Utah
$755,000 (1/8th ownership)
4 bds. l 4.5 ba. l 2,584 sq ft
Head to Pacaso to learn more about its innovative co-ownership model that addresses the common challenges of second home ownership!
🤝 Venture Deals
LA Companies
- Oak Essentials, the natural skincare brand founded by Jenni Kayne, has raised an undisclosed amount in Series A Funding from Silas Capital and Unilever Ventures. This investment will drive the brand’s expansion, focusing on product development, boosting marketing efforts, and expanding distribution channels. - learn more
- Playhouse MD, an upcoming children’s healthcare platform that incorporates play to enhance health outcomes, has raised $4M in funding, according to a recent SEC filing. - learn more
- FluidLogic, a high-performance hydration system provider, raised $15M in a Series A Extension led by Solyco Capital to support product development and innovation for adventure sports and outdoor endurance categories, with consumer products launching in early 2025. - learn more
- Reflect Orbital, which uses in-space reflectors to direct sunlight to solar farms and large-scale lighting applications after sunset, has raised $6.5M in seed funding led by Sequoia Capital. The funding will help the company develop production vehicles and expand its team as it builds space-based energy infrastructure. - learn more
- Feno, a Los Angeles-based company developing an AI-powered energy trading platform, raised $6M in seed funding led by Bold Capital Partners. - learn more
LA Venture Funds
- Finality Capital led a $4M Pre-Seed Funding Round for Octra, a pioneering blockchain network focused on Fully Homomorphic Encryption (FHE). - learn more
- Smash Capital led a €20M Series B round into Vilnius-based Ovoko, an e-commerce platform for buying and selling used car parts across Europe, marking Smash Capital's first investment in Lithuania. The funds will support Ovoko's product development, market expansion, and team growth as it aims to dominate the European market for second-hand automotive components. - learn more
- M13 led a $9M Series A Funding Round for Zenlytic, the world’s first self-serve business intelligence platform. - learn more
LA Exits
- Donut Digital, a Manhattan Beach creative-led performance marketing agency, agreed to be acquired by New Engen, a leading digital marketing agency. - learn more
- National Emblem Inc., a renowned manufacturer of emblems and specialty products, has been acquired by Enrich Enterprises Inc., which will now operate under the National Emblem tradename. - learn more
- Continuum Global Solutions’ healthcare vertical has been acquired by Everise, a customer service management company, enhancing Everise’s capabilities in pharmacy benefit management and expanding its growth prospects in the healthcare sector. - learn more
- Radical Semiconductor, a company specializing in processing-in-memory technology, has been acquired by BTQ Technologies, a leader in post-quantum cryptography. This acquisition strengthens BTQ’s ability to secure data in the post-quantum era by integrating Radical Semiconductor's advanced technology portfolio. - learn more
- Subrosa Digital, a full service digital marketing and consulting agency, was acquired by Navio Networks, a leading CTV operator in Free Ad-supported Streaming TV (FAST). - learn more
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Here's How To Get a Digital License Plate In California
03:49 PM | October 14, 2022
Photo by Clayton Cardinalli on Unsplash
Thanks to a new bill passed on October 5, California drivers now have the choice to chuck their traditional metal license plates and replace them with digital ones.
The plates are referred to as “Rplate” and were developed by Sacramento-based Reviver. A news release on Reviver’s website that accompanied the bill’s passage states that there are “two device options enabling vehicle owners to connect their vehicle with a suite of services including in-app registration renewal, visual personalization, vehicle location services and security features such as easily reporting a vehicle as stolen.”
Reviver Auto Current and Future CapabilitiesFrom Youtube
There are wired (connected to and powered by a vehicle’s electrical system) and battery-powered options, and drivers can choose to pay for their plates monthly or annually. Four-year agreements for battery-powered plates begin at $19.95 a month or $215.40 yearly. Commercial vehicles will pay $275.40 each year for wired plates. A two-year agreement for wired plates costs $24.95 per month. Drivers can choose to install their plates, but on its website, Reviver offers professional installation for $150.
A pilot digital plate program was launched in 2018, and according to the Los Angeles Times, there were 175,000 participants. The new bill ensures all 27 million California drivers can elect to get a digital plate of their own.
California is the third state after Arizona and Michigan to offer digital plates to all drivers, while Texas currently only provides the digital option for commercial vehicles. In July 2022, Deseret News reported that Colorado might also offer the option. They have several advantages over the classic metal plates as well—as the L.A. Times notes, digital plates will streamline registration renewals and reduce time spent at the DMV. They also have light and dark modes, according to Reviver’s website. Thanks to an accompanying app, they act as additional vehicle security, alerting drivers to unexpected vehicle movements and providing a method to report stolen vehicles.
As part of the new digital plate program, Reviver touts its products’ connectivity, stating that in addition to Bluetooth capabilities, digital plates have “national 5G network connectivity and stability.” But don’t worry—the same plates purportedly protect owner privacy with cloud support and encrypted software updates.
5 Reasons to avoid the digital license plate | Ride TechFrom Youtube
After the Rplate pilot program was announced four years ago, some raised questions about just how good an idea digital plates might be. Reviver and others who support switching to digital emphasize personalization, efficient DMV operations and connectivity. However, a 2018 post published by Sophos’s Naked Security blog pointed out that “the plates could be as susceptible to hacking as other wireless and IoT technologies,” noting that everyday “objects – things like kettles, TVs, and baby monitors – are getting connected to the internet with elementary security flaws still in place.”
To that end, a May 2018 syndicated New York Times news service article about digital plates quoted the Electronic Frontier Foundation (EFF), which warned that such a device could be a “‘honeypot of data,’ recording the drivers’ trips to the grocery store, or to a protest, or to an abortion clinic.”
For now, Rplates are another option in addition to old-fashioned metal, and many are likely to opt out due to cost alone. If you decide to go the digital route, however, it helps if you know what you could be getting yourself into.
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Steve Huff
Steve Huff is an Editor and Reporter at dot.LA. Steve was previously managing editor for The Metaverse Post and before that deputy digital editor for Maxim magazine. He has written for Inside Hook, Observer and New York Mag. Steve is the author of two official tie-ins books for AMC’s hit “Breaking Bad” prequel, “Better Call Saul.” He’s also a classically-trained tenor and has performed with opera companies and orchestras all over the Eastern U.S. He lives in the greater Boston metro area with his wife, educator Dr. Dana Huff.
steve@dot.la
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